By JOSEF KEFAS SHEEHAMA
It is very concerning that the Namibian government and its ministers find State-Owned Enterprises (SOEs) appealing, despite the fact that they cost the taxpayer millions of dollars. It is undeniable that some SOEs contribute to market failures, which eventually affect macroeconomic variables, as proven by current proceedings in Namibia’s distinct competent courts.
Therefore, the SOEs were founded with a capitalist mindset to encourage citizens to view them more critically, while a few individuals take advantage of wealth that is justified by Namibia’s severe inequality, leaving others in poverty and destroying the economy of the country. For example, there is an immense flaw that guarantees; that some elites benefit from NAMCOR resources and that funds only go to one family, which is quite upsetting.
It is crucial to point out that Namibia’s general state model demonstrated how the economy as a whole is impacted by the State-Owned Enterprises’ ongoing performance degradation. Growing government debt and budget deficits may raise the pressure to borrow money to make ends meet. Increased domestic borrowing will reduce GDP and raise unemployment, particularly among the unskilled. Being prepared and aware of the effects on the broader economy underscores the importance of addressing competitiveness concerns in State-Owned Enterprises. However, with the right settings and collaboration from other stakeholders, SOEs remain an important tool for delivering societal and public value. In addition to creating long-term value creation for the general public, SOEs can build trust by being transparent and accountable in their reporting and communication of targets, relationships, actions, and performance. Despite their limited contribution to government revenue, State-Owned Enterprises (SOEs) pose significant fiscal risks due to their lack of financial viability and require extensive budget support. This is a complete lack of economic competence, instruments, and experience. The risk of not being prepared to develop an enterprise sustainability vision, strategy, and structure is considerable.
Furthermore, it is long overdue for the new administration to launch a comprehensive assessment of its State-Owned Enterprises. This will enable the government to make bold and informed decisions about the future, optimize resource allocation, and build a more competitive and efficient economy while maintaining providing critical public services and satisfying national development targets. As certain SOEs are operating poorly, we must remember that government revenue created by hardworking Namibians is intended to be distributed to provide citizens with essential services. Unfortunately, some Sate-Owned Enterprises rely on government bailouts. The least fortunate and most vulnerable Namibians rely largely on the government’s fundamental responsibilities. As a result, the new administration must discontinue transferring funds to failed SOEs, diverting resources away from sectors where they are desperately needed. Addressing rising risks and inadequate efficiency in State-Owned Enterprises (SOEs) is crucial to Namibia’s transition to a more sustainable growth model. To realize Namibia’s growth potential and ensure rapid economic development that raises the standard of living for all Namibians, bold, serious consequence management must be applied. A good SOE can enhance resource allocation, eliminate major vulnerabilities, and provide space for employment development as a result of a stronger economic recovery in areas where the majority of SOEs fail owing to poor management.
Furthermore, the government may find itself borrowing money from outside sources if it continues to support any of these troublesome SOEs. Large funding injections are usually required for SOE bailouts, primarily for enterprises that are having financial difficulties. As a result, the government will need to borrow funds to cover these expenses. The government’s debt to GDP ratio is predicted to worsen to about 68%, with the potential to eventually exceed 70%. It is projected that the debt service burden will exceed N$13.7 billion in the fiscal year 2025–2026, surpassing the total development budget. The continuation of these acts will have an impact on the vital investments in many businesses that can help raise the standard of living for all Namibians. In contrast certain State-Owned Enterprises have contributed to drive economic growth, social stability, and infrastructure development, they are frequently chastised for inefficiency and potential market distortions. It is vital to recognize that SOEs must take a path that blends their ongoing support for national goals with the need for enhanced efficiency and a market-oriented focus. The Bank of Namibia’s Economic projection expects that the economy will increase by roughly 4.0% in 2025, indicating an optimistic outlook for the country’s economic performance. In truth, the government is under pressure to continue streamlining spending, which is likely to undermine economic prospects. Private sector spending has slowed as a result of relatively weak domestic demand. So, what should be done to support economic growth and development? It is time to break the loop of SOE addiction, cut off the supply, and demand better from our public institutions. The new government must prioritise its responsibility to Namibians. In general, the new government must make the daring decision to investigate the SOEs to determine if it requires all of them and to launch a reengineering process for those that it decides to preserve. To prevent spending resources on enterprises that will be a drain on the state’s resources, the government must exercise vigilance.
Moreover, if effectively implemented, these measures tend to increase the likelihood that nonperforming SOEs will be privatized. This is due to the fact that better local conditions can inspire investor confidence, which in turn can lead to investment, including the private sector’s acquisition of nonperforming SOEs, which can promote growth. Privatization and investment have been largely hampered by the current external conditions of corruption, political influence, and poor management of SOEs. To prevent a strain on government revenue, it is crucial to gauge the operational and financial performance of SOEs. In this context, there is a need to strengthen fiscal risk identification, assessment, monitoring, and mitigation, particularly in terms of unplanned SOE bailouts caused by the realization of explicit or implicit contingent obligations. Building the capacity to identify and manage fiscal risks will support continuing reform efforts and serve as part of an early warning and mitigation system for risks posed by possible SOE financial challenges.
The establishment of independent supervision systems, the appointment of competent and experienced board members, and the enhancement of transparency and disclosure standards will be crucial amongst SOEs.
As a result, while the new administration could encounter difficulties along the way, the benefits of a revitalized and productive state-owned company sector are enormous. Namibia’s administration must grasp this opportunity and steer the country toward a more sustainable and just economic destiny if it hopes to maintain its wealth and the welfare of its people in the future.
